Correlation Between Washington Federal and Bank of Idaho Holding

Can any of the company-specific risk be diversified away by investing in both Washington Federal and Bank of Idaho Holding at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Washington Federal and Bank of Idaho Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Washington Federal and Bank of Idaho, you can compare the effects of market volatilities on Washington Federal and Bank of Idaho Holding and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Washington Federal with a short position of Bank of Idaho Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Federal and Bank of Idaho Holding.

Diversification Opportunities for Washington Federal and Bank of Idaho Holding

-0.63

Correlation Coefficient

Washington Federal  Bank of Idaho Holding

Excellent diversification

The 3 months correlation between Washington and Bank is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Washington Federal and Bank of Idaho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Idaho Holding and Washington Federal is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Washington Federal are associated (or correlated) with Bank of Idaho Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Idaho Holding has no effect on the direction of Washington Federal i.e., Washington Federal and Bank of Idaho Holding go up and down completely randomly.

Pair Corralation between Washington Federal and Bank of Idaho Holding

Given the investment horizon of 90 days Washington Federal is expected to under-perform the Bank of Idaho Holding. But the stock apears to be less risky and, when comparing its historical volatility, Washington Federal is 2.1 times less risky than Bank of Idaho Holding. The stock trades about -0.1 of its potential returns per unit of risk. The Bank of Idaho is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  3,300  in Bank of Idaho on October 27, 2024 and sell it today you would earn a total of  1,910  from holding Bank of Idaho or generate 57.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

Washington Federal  vs.  Bank of Idaho

Washington Federal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Washington Federal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Bank of Idaho Holding

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Idaho are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Bank of Idaho Holding exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Washington Federal and Bank of Idaho Holding

The main advantage of trading using opposite Washington Federal and Bank of Idaho Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Federal position performs unexpectedly, Bank of Idaho Holding can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Bank of Idaho Holding will offset losses from the drop in Bank of Idaho Holding's long position.

The idea behind Washington Federal and Bank of Idaho pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.